Bad Credit Car Down Payment Requirements

When you have bad credit and are taking out an auto loan, there’s typically no avoiding the down payment requirement. Although it may feel like you’re wasting money, a down payment is there to help, not hurt you in the long run.

Why Do Bad Credit Car Buyers Need a Down Payment?

Bad Credit Car Down Payment RequirementsBecause subprime lenders look past your credit score to determine if you qualify for financing, they want to make sure you’re committed to completing a loan. Asking for a down payment helps offset the “risk factor” that’s associated with bad credit, the same as providing a list of personal references and meeting the income and employment requirements. Unfortunately, you generally can’t avoid getting a higher than average interest rate, but making a larger down payment can reduce the interest charges and make financing more affordable.

Down payments with subprime lending is sometimes referred to as “borrower participation.” A down payment not only gives buyers a greater sense of ownership, lenders like borrowers who put their own money on the line.

How Much Down Payment is Needed for a Car Loan with Bad Credit?

Although the minimum down payment amount varies for a bad credit car loan, most subprime lenders require at least $1,000 or 10 percent of the vehicle’s selling price, whichever is less. You can meet the down payment requirement by paying cash, using trade-in equity, or a combination of both. As long as you meet the minimum, you’re fine. But if you can, you should put even more down.

Ideally, you want a down payment that’s closer to 20 percent, although this isn’t attainable for many car buyers struggling with bad credit. Even if you can’t make a down payment that large, any additional cash helps. By using online tools and calculators, you can see just how much of a difference a bigger down payment can make.

Ready to Finance a Car?

The bottom line here is that you likely aren’t getting out of the down payment requirement with subprime lenders. But keep in mind that a down payment lowers your monthly payment, reduces the interest charges, and reduces the time you’re upside down – that is, when the loan balance is greater than your vehicle’s value. Once you have the money set aside for the down payment requirement, you can begin to look for financing. If you’re unsure of where to start, turn to The Car Connection.

With our auto loan request form, and our nationwide network of dealerships that know how to handle unique credit situations, we want to connect you to a local dealer that can help you get the financing you need. What are you waiting for? Get started right now!


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